Best Buy the authority in electronics? 'Not anymore,' says CEO

A person walks away from a shuttered Best Buy store in Chicago. The electronics… (Scott Olson / Getty Images )

Add slumping profit to Best Buy’s difficult first quarter: The struggling electronics retailer’s net income tumbled 26% over the same period in which its CEO resigned, its chairman was replaced and its big-box store model was deemed lacking.

Net income slid to $158 million, or 46 cents a share in the quarter ended May 5, down from $212 million, or 53 cents a share, during the year-earlier period. Absent restructuring charges, earnings came in at 72 cents a share.

Revenue rose 2% to $11.6 billion.

Interim Chief Executive Mike Mikan gave a blunt assessment of Best Buy’s failings and flaws during a conference call with analysts.

“Not that long ago, Best Buy was the authority in this market; our stores wow-ed consumers,” he said. “Not anymore. Today’s marketplace is different. From my perspective, it’s a marketplace we weren’t prepared for.”

Mikan said that the company no longer offers a unique customer experience and doesn’t have a “distinct competitive advantage” anymore. Best Buy “is not performing up to its past standards” and needs “to change substantially,” he said.

The retailer is in full turnaround mode, closing down dozens of superstores and shrinking others while keeping prices in line with online competitors such as Amazon.

The company is also trying to develop its older customer base, launching a Geek Squad service for AARP members. Mikan said the company will announce more specifics of its restructuring plan this summer.

“Tough decisions will be made,” he said. “We must take a fresh look at our investments and the entire business, and I can assure you there'll be no sacred cows.”

Staying fresh was difficult in the first quarter, when same-store sales slumped 5.3% as positive growth in smartphones, tablets and appliances failed to overcome the decrease in sales of games, televisions and notebook computers.

Weak sales in China and Europe also didn’t help. Neither did the scandal surrounding former Chief Executive Brian Dunn, who resigned last month amid an internal probe into his relationship with a female employee.

Last week, founder and Chairman Richard Schulze stepped down as well over his role in the situation.